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SEC Pauses Its Own Climate Disclosure Rule

April 9, 2024

The Securities and Exchange Commission (SEC) on April 4 issued a stay on its March 6 climate disclosure rulemaking. This unusual move comes in response to the multiple lawsuits brought against this rule since its promulgation.

As noted in previous CREFC Policy and Capital Markets Briefings, the SEC’s climate regulation is highly controversial despite having been significantly revised since the initial proposal.

Since March 6, nine lawsuits have been filed:

• Two lawsuits were filed by progressive organizations, including the Sierra Club and the Natural Resources Defense Council, claiming the final rule had been excessively scaled back from its proposed form.
• Seven suits, including those filed by energy companies and Republican-led states, have argued that the rule violates the First Amendment and fails the major questions doctrine.

Claims have now been consolidated in the Eighth Circuit Court of Appeals pending litigation.

What they’re saying: The SEC said it would continue "vigorously defending" the rules, which are “consistent with applicable law and within the Commission’s long-standing authority.”

However, the SEC also noted that:

“A stay avoids potential regulatory uncertainty if registrants were to become subject to the Final Rules’ requirements during the pendency of the challenges to their validity.”

What this means: The stay does not mean that organizations should stop preparing for climate-related disclosures.

In the two years since the SEC issued the proposal, its climate disclosure requirements have been eclipsed in stringency by other key entities, including the state of California, the EU, and the International Sustainability Standards Board. Many investors are also seeking greater climate disclosures.

The bottom line: Regardless of where we land with final SEC climate disclosures, organizations should continue to monitor climate disclosure requirements and ensure they will be able to meet applicable regulations.

What’s next: CREFC continues to closely monitor these regulatory and judicial developments and will keep membership apprised.

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